Here’s a real problem I see when businesses focus on competition—or competitors.
Yes, paying attention to competition is smart. You can’t ignore competition completely. But nor should any business pay too much attention to competition. Why?
Well, the main reason I recommend against too much focus on what the other guy is doing is that it will slowly drag a business into a reactive mode. Whatever Company A does, we must “be there” as well. Nonsense.
The thing is, Company A is going to make a lot of mistakes and you’re going to chase him into the thickets. If he slashes prices, you’ll slash prices. I can hear the denial, “no we won’t.” The hell you won’t. You will. You’ll panic if your main competitor cuts prices by 30%. You bet you will. Look at the airline industry. One cuts fares, they all cut. One raises fares, up go them all.
Rarely if ever does one of the major airlines break away and do something, well, remarkable.
And that’s what happens to a business that pays too much attention to what the other guy is doing. The sales people tell me all the time, “but Company A is 25% cheaper, how can we sell anything?” The sales team makes a good point if management won’t support or encourage the innovation necessary to defeat a 25% price difference.
This you see is at the heart of the difficulty of American business. No creativity. Rather, creativity is not wanted or welcome. Just do your job. We will lower price by cutting cost.
The end product of this thinking, really lack thereof, is either a crappy product that eventually fails or the ultimate cost cut: move to China.
But take your eyes off the competition and look forward. You’ll see that the focus on competitors has positioned your business squarely in place to battle the competitor you know. The competitor you don’t know is going to hammer the hell out of your customer base and your margins.
Think Sears battles Montgomery Wards (remember them?) and both lose to, K-mart who loses to Wal-Mart. Think, Radio Shack battles hobby shops and loses the war, yes, it’s war, to, with me yet? Best Buy. Best Buy defeated Circuit City. Never saw it coming.
Blockbuster beat up all the small independent video rental stores. Okay, nearly all. There might be a couple left. Blockbuster is busted. Broke, done finished because they never saw Netflix coming. The fully loaded, double semi headed straight at them and they never saw it coming until they took up their final position on the windshield.
Focus on competition and you’ll not see what’s dead, a good word, ahead of you. Continue chasing instead of innovating and you’ll take the turn-off toward irrelevance and never know it until you pull in for a fill up and notice the fillin’ station, diner and motel are all closed up…